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Facility Strong: How to Fund Investments in Resilience
OTHER PARTS OF THIS ARTICLEPt. 1: This PagePt. 2: Does Reliance on Technology Make Buildings Less Resilient?
The U.S. didn’t have to wait too long in 2021 to suffer its first billion-dollar disaster of the year. And this one was a doozy. In February, record low-temperatures and record-high snowfalls in Texas caused widespread power outages. More than 4.5 million people lost power, some for longer than a week. More than 150 people died as a result, and the price tag for this disaster is estimated at around $100 billion.
The Texas disaster continued an alarming trend of increases in both frequency and severity of billion-dollar disasters in the U.S. In 2020, there were 22 separate billion-dollar disasters, shattering the previous record of 16, according to data from the National Centers for Environmental Information. These included wildfires, extreme storms, tornadoes, hurricanes, drought, and even a derecho, which in August 2020, caused more than $11 billion in damage across the Midwest.
Without question, extreme weather fueled by climate change is getting worse. And as it gets worse, it’s getting more and more expensive, both in terms of dollars and lives.
“Disruptions just keep happening, it doesn’t matter where you are,” says Jim Newman, founder and principal of Linnean Solutions and a member of the board of directors of the Resilient Design Institute.
“We’re increasing in pace in the number and severity of natural disasters,” says Evan Reis, executive director of the U.S. Resiliency Council. “The hazards are growing in frequency and magnitude.”
So whether you manage a hospital in south Texas or a data center in the Research Triangle in North Carolina, the need for building resilience has never been greater.
“Building resilience is about planning for the unexpected,” says Alex Wilson, founder of BuildingGreen and president of the board of directors of the Resilient Design Institute. “And there seem to be a lot more unexpected events than used to be the case, especially as the impacts of a changing climate become more significant.”
For facility managers, resilience has historically been a tough nut to crack in terms of finding resources. Much like security measures, investments in resilience only pay back if there actually is a disaster. That means the purse-string-holders are sometimes reluctant to make investments. But framing resilience as the critical business issue it is can be the best way to convince top management to fund it. Here is some advice.
Money for resilience
Often, resilience and emergency preparedness are used interchangeably. Though both are crucial for business continuity and recovery, the concepts themselves should be thought of and focused on a bit differently.
“Emergency preparedness is really thinking about what happens when the disaster happens — who gets told when not to come to the office, what gets turned off, who puts out the sandbags,” says Newman. “But resilience is a different thing — resilience is how you can prepare the facility and the organization to be able to withstand disruptions and changes and learn from them and get stronger.”
At some point, it’s splitting hairs, but when going to upper management to ask for funding, defining terms accurately is important. That way, everyone is on the same page. One strategy is to think about risk, says Reis. Facility managers know about risk assessments — defining what is the most probable risk, and putting money towards mitigating those.
Resilience is like investing in a mutual fund, Reis says. There are several levels of risk. In this analogy, focusing on emergency preparedness is at the low end in terms of cost and risk, because emergency preparedness is largely procedural. On the other hand, investments in hardening a facility are on the higher end.
“It’s harder to spend $1 million to seismically retrofit this building when we can’t get away with $20,000 for emergency response training,” he says. But that million dollar investment may not only save the business, but may save lives.
But how specifically do you show the payback for an investment in a resilience strategy? The simple way is to show the cost of loss of business.
“Business interruption is very expensive for most companies,” says Wilson. “And good economic arguments can often be made for reliable backup power as well as building design features that will allow a building to maintain occupancy if heating fuel is interrupted — natural gas supplies are often shut off during natural disasters to prevent fire — or during extended power interruptions when backup power may only be serving smaller, critical loads.”
Newman presents a specific example. An architecture firm he worked with was remodeling its facility. But much of its technology was located in its basement and the facility was in an area prone to flooding. So to justify the cost of the resilience measure of moving technology, which was about $200,000, they showed that the cost of going down due to a flood would’ve been about $500,000 per day, which wasn’t covered by insurance because it’s lost business, not the equipment itself. That made the investment decision easy, he says.
This doesn’t work, however, if an organization is only planning to hold a facility for a couple years. But most organizations, who are in for the long-haul, should use a long-term perspective to think about an investment in resilience. Again, because natural disasters aren’t getting less frequent or less severe, it becomes even more important to prioritize resilience. That potential disaster you wouldn’t have thought possible five years ago looks increasingly likely at some point in the next 20.
“If you have a long-term perspective, these investments do pencil out,” says Reis. Along these lines, you can let your insurance company think long-term for you, he says, and use potentially reduced insurance rates for resilience strategies as part of the justification argument. Reis says his organization, the U.S. Resiliency Council, is working on proving that lower insurance premiums are possible with particular resilience strategies.
Finally, investments in resilience can be justified if it can be shown they can improve the top line in terms of increased business. How is that possible? While it’s certainly not as cut-and-dried as demonstrating the cost of business loss, there is demonstrable value to showing how a facility can weather a disaster, and therefore be a resource to the community in the case of said disaster.
“I think an important part of resilience is creating buildings that will keep occupants safe during natural disasters,” says Wilson. “These are buildings that can be safe havens for their occupants and lessen the need for evacuation or rescue during emergencies.” Wilson mentions a project he worked on at a hotel in Gulf Shores, Alabama. The goal was to make the facility not only able to weather the next hurricane, but also provide a staging area and safe space for emergency personnel working in the area.
Another way to show this top-line value is to achieve a certification with a resilience rating system. Like LEED and other green building rating systems, there is calculable value for tenants or occupants in terms of potentially increased rents for a certification with a resilience rating system. Two prominent examples are the U.S. Resiliency Council’s Building Rating System, which assesses buildings’ ability to withstand earthquakes, and Green Business Certification Inc.’s RELi Rating System, which assesses a facility’s resilience in all phases of design and construction. In addition, the U.S. Green Building Council has developed pilot credits for resilience that can be included with an LEED initiative. This shows a facility is committed both to sustainability and to resilience.
Greg Zimmerman is deputy editor, facility market.
Facility Strong: How to Fund Investments in Resilience